Tuesday, November 16, 2010

European Auditors slam 5 billion Euro program

This is not a good time for another financial mismanagement story to come out as it strengthens the hands of those countries not imbued with what Mr Barroso calls a 'European Spirit' (more on which later), but the European Court of Auditors operate on their own timetable and they had no room to manoeuvre.

So today in the Residence Palais in Brussels they launched their latest report,

Implementation of the Leader approach for rural development

And for veteran watchers of ECA reports it is a cracker.

The European Court of Auditors has assessed whether the Leader approach has been implemented in ways that add value, while minimising the risks to sound financial management.

The answer is, well, err... No it hasn't.

Indeed the summary of the document uses distinctly terse language about how the program, a program slated to cost 5 billion Euros between 2007 and 2013 mark you,

The Court also found weaknesses in the soundness of the financial management by the LAGs. LAGs have not taken account of efficiency, particularly in awarding grants for projects that were already under way, or even completed, before the grant decision was made. Procedures were not always transparent and did not sufficiently demonstrate that the LAGs took decisions on an objective basis, free from conflicts of interest. These weaknesses echo those observed by the Court in the Annual Report for the financial year 2000.

The Commission and Member States have not been sufficiently demanding and share some responsibility with the LAGs for limiting the potential added value of the Leader approach. They have not taken sufficient action to limit the costs and risks. The Commission and Member States have tolerated the situation where LAGs do not have effective procedures to avoid conflicts of interest.

Given the local nature of LAGs, one of the greatest risks for efficiency, the added value of the Leader programmes and for the reputation of the EU is that of a conflict of interests, whereby a project promoter may inf luence the project selection decision in their favour. The risk is heightened in LAGs that do not have transparent, objective and well-documented procedures,

Which is referenced thusly,

24- There is a conflict of interests where the impartial and objective exercise of the functions of a financial actor or other person, as referred to in paragraph 1, is compromised for reasons involving
family, emotional life, political or national affinity, economic interest
or any other shared interest with thebeneficiary.

This graph (page35) really shows quite what the problem is. Only in Ireland were no conflicts of interest found (and in Spain, but they didn't look).

This audit has to be one of the most devastating reports ever produced by the ECA.